Source: US Commission on Long-term Care report for the US Congress (will add file to CMS)

Source: US Commission on Long-term Care report for the US Congress (will add file to CMS)

Source: US Commission on Long-term Care report for the US Congress (will add file to CMS)

Source: US Commission on Long-term Care report for the US Congress (will add file to CMS)

Source: US Commission on Long-term Care report for the US Congress (will add file to CMS)

Source: US Commission on Long-term Care report for the US Congress (will add file to CMS)

Source: US Commission on Long-term Care report for the US Congress (will add file to CMS)

Source: US Commission on Long-term Care report for the US Congress (will add file to CMS)

Source: US Commission on Long-term Care report for the US Congress (will add file to CMS)

Source: US Commission on Long-term Care report for the US Congress (will add file to CMS)

Source: US Commission on Long-term Care report for the US Congress (will add file to CMS)

Source: US Commission on Long-term Care report for the US Congress (will add file to CMS)

Transcript

1.
The 3 Biggest Risks to
Annaly Capital
Management

2.
Dave Koppenheffer: Low Rates
Rising interest rates are bad for Annaly.
It lowers the market value of currently held
securities, decrease book value, increase borrowing
costs, and cause myriad other problems.
So it might sound odd, but one of the greatest risks
to Annaly is interest rates staying lower for longer
than expected, or beyond mid-2015.

3.
Dave Koppenheffer: Low Rates
Annaly is about as prepared for rising interest
rates as they can be, and it's costing them a ton in
potential earnings to stay that way.
Annaly has deleveraged, meaning the company is
borrowing less. While this reduces the impact rising
interest rates has on their equity, it also means
holding fewer securities and making less money.

4.
Dave Koppenheffer: Low Rates
The longer Janet Yellen
and the Federal Reserve
wait to increase rates,
the longer Annaly needs
to stay ultra
conservative, and the
longer it will take before
Annaly sees another
advantageous investing
environment.

5.
John Maxfield: Its Executives
Interest rate risk and prepayment risks are real
concerns that deserve the attention of investors, I
don’t believe either of them is the biggest risk. To
me, the company’s management team is a risk.
The team has a history of…

6.
John Maxfield: Its Executives
…enriching themselves at
the expense of
shareholders…

7.
John Maxfield: Its Executives
…hiring relatives and them
paying them seven-figure
salaries….

9.
John Maxfield: Its Executives
…and eliminating
transparency by outsourcing
management to a private
company that’s owned and
operated by Annaly’s now-
former executives…

10.
Jordan Wathen: Diverging
The biggest risk I see with Annaly Capital today is its
willingness to diverge from its core business.
In the first quarter, the company signaled its desire to
break into commercial real estate.
For a long time Annaly has played a part in funding
commercial real estate via its commercial loan
exposure, though agency securities (residential
mortgages) made up the bulk of its business.

11.
Jordan Wathen: Diverging
There is a very big difference between investing in
commercial real estate loans and managing a hard asset
like a portfolio of commercial property.
There are new risks to
understand and price, rent
checks to collect and cash, and
leases to sign. It requires just as
much operational expertise as
it does asset management
experience.

12.
Jordan Wathen: Diverging
Where is Annaly’s true competitive advantage in
managing commercial real estate assets. Although
Annaly is big, much of its balance sheet scale
comes from repurchase agreements and short-term
funding sources.
Obviously no bank will entertain the idea of
financing long-term investments with these fleeting
funding sources. Scale won't be a benefit in
commercial real estate.

13.
Jordan Wathen: Diverging
Shareholders need to pay particularly close
attention to how this strategy develops over time,
as commercial real estate investments -- debt or
equity -- don't have the full backing of the U.S.
government like agency securities do.
It's a riskier strategy made only riskier by the fact
the company has much less experience in it than its
traditional "bread and butter" loan book.

14.
Dividend investors, are
you taking advantage
of this little-known tax
loophole?